Steen Jakobsen: Expect A 30% Stock Market Correction in 2014

Tyler Durden's picture

Submitted by Adam Taggart of Peak Prosperity,

This week, Chris talks with Steen Jakobsen, Chief Investment Officer of Saxo Bank. We wanted to see through the eyes of a professional economist, which Steen kindly allowed us to do.

Steen agrees that central banks have largely failed in their misguided attempts to boost growth via trickle-down programs. Pretty much all the benefits of the recent years of money printing have gone to the upper echelons, with the true engines of growth and jobs -- small to medium sized enterprises (SMEs) -- getting very little.

As a result, financial asset prices have been driven up too high, which Steen anticipates will correct at some point in 2014; likely by 30% or so:

Here is my practical view. Since Q3 of last year I’ve been 70% in fixed income because I do believe, and I continue to believe, that we’ll see new low interest rates. In a world that cannot restart itself, it a world that believes in 'extend and pretend', you will not have any activity. You don’t have any move towards a mandate for change. So that means that history tells us the only way we get change is through the system failing. I’m not talking about a systemic failing; I'm talking about people owning up to the fact that we need to activate the SME. So I think we’ll see a progression towards helping the SMEs.

 

But in terms of the market, I have been very on fixed income, an increase in the exposure right now from 70 to 90% taking whatever equity I have down. Not because I’m afraid of 'doom and gloom' but simply because I think you can have a huge amount of leverage into the fixed income market here when everybody seems to believe that interest rates cannot go lower -- now confirmed today by the Q1 data from the US. The world is simply starving because the world is rebalancing. The US current account deficit moved from -800 to -400. The world needs $400 billion worth of new export markets before it gets back to break even.

 

At the same time, Asia and China certainly are rebalancing their way from nominal growth towards quality growth. Again, the first derivative of that is lower growth, deflation, exported to the rest of the world.

 

So I think the low comes in economically in Q1 and Q2 in 2015. Every single macro indicator you can find will bottom at Q1/Q2. For the equity market, I think the top is 1900/1950. But you can't both predicted the level and the timing. And I’m more confident about the timing, not the level. So my timing I’m confident, and the timing I am confident on is the fact that the second half of this year is going to see a 30% correction from the top.

He also agrees that rising energy costs and overall resource scarcity are real threats to future economic growth; threats that he believes most economists and investors are blind to.

On all the above, we're in agreement with Steen.

In other areas, our predictions differ. But that's why we have guests like him on the program: to hear the rational behind contrasting views, and to learn what those moving large sums of capital in today's markets are thinking.

Despite the near term likelihood of a major correction, Steen remains quite optimistic. He believes that the correction will be a clearing event not just for overly-elevated prices, but also will serve as a wake-up call about the net energy situation that will lead to better policy decisions. We sure hope he's right, but we sadly think it will take a major price shock or supply shortage of key commodities to get the attention of our leaders.

Click the play button below to listen to Chris' interview with Steen (42m:43s):

 

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Aknownymouse's picture

Yea yea yea. Been waiting for 5 years. Not happening apparently.

Beam Me Up Scotty's picture

"Steen agrees that central banks have largely failed in their misguided attempts to boost growth via trickle-down programs."

Trickle down!!!  LOL!!  This is TRICKLE UP at its finest!!!!!

If we are lucky we will get a 3% correction.  You can kiss the days of 30% corrections goodbye!!  They own the printing press, therefore, every single number you see on CNBS is goalseeked!

Gold DOWN, S&P UP!!

Slave's picture

I don't know about you, but this article gave me a fucking huge erection.

zerozulu's picture

Situation is so fragile that this 30% will bring unrecoverable hangover.

NoDebt's picture

He's been 70% bonds since Q3 of last year.  Yeah, I've been cash-heavy and bond-heavy since then, too.  Glad to know he's had his ass handed to him just like I have.

markmotive's picture

A 30% drop would be great. Bring it on!

THX 1178's picture

Would a drop such as this bring the untaper? Would it? Or woul;d Belgium just ramp up its purchases? I'm sorry, I mean "Belgium"

Kirk2NCC1701's picture

I'd get a big woodie if this damn Correction finally came about and also corrected the damn Real Estate market. 

Especially in the over-priced areas, so we could BTFD.  It's my turn to get even, dammit!

Mr. Ed's picture

I'd like to see that!

but, you can be sure brokers'll be out there telling every lie and fairy tale in the book to keep the bigger fools a comin'.

Carpenter1's picture

at this stage, there could never be a 30% correction. 6% or 80%

playnstocks's picture

We're seing the correction right now in the futures.. S&P down 1.25 -.07%.. Thats the selloff..

 

bbbbbbbuy BTFD..BTFATH-MFrs

LooseLee's picture

Well, looks like the PINKO COMMIES have secured your soul. If you are not part of the solution you are part of the problem. Sorry to see you have been converted to the 'wrong' team...

HaroldWang's picture

Yep. Cue Dr. Doom too. He'll say the same. That's what these guys do. PERMA BEARS. 

CrashisOptimistic's picture

Dood.

He's CIO at a fucking bank.  He's basically lower than foot fungus.   He's not a perma bear.  He just wants people who are pessimistic to send him their money so his annual expense ratio or trust management fee or 2/20 or however he bills for advice is padded.

And wait a minute.  Who the fuck said 30% down was a big deal and doomsville.  

30% down is the warm up.  80% down is the real McCoy, and that ain't a bottom.  That's just where it will be the day the diesel is so scarce trucks don't bring food to markets on Manhattan.  That's where it will be when it all shuts entirely because the market staff are out looking for food.  

Ask what sort of recovery the Iraq markets got after they closed.  There is no law of the universe that says a "bottom" ever has to rise again.

rum_runner's picture

I like your narrative but I'm no longer a believer in a grand reset.  Sure there's gonna be crashes and we'll need something powerful to frighten the folks into going along with some monetary buggery (my bet -- a Fed conversion of all UST into a "cold storage" state until "conditions improve").. but in the end cash is fiat flim flam flom.. Weymar didn't resort to cannibalism (though they didn't have EBT cards).. Why is diesel gonna get so expensive that farmers don't plough and delivery people don't drive?

The world ends not with a bang but a whimper.

beachdude's picture

Maybe... your comment reminded of Kierkegaard...

“A fire broke out backstage in a theatre. The clown came out to warn the public; they thought it was a joke and applauded. He repeated it; the acclaim was even greater. I think that’s just how the world will come to an end: to general applause from wits who believe it’s a joke.”

RaceToTheBottom's picture

"There is no law of the universe that says a "bottom" ever has to rise again."

Sometimes there is no bounce, sometimes they just splat.

asking4it2k's picture

As long as the FEDs QE and ZIRP plans are still going, this market will keep rising!!

thisisjustarandomusernameicreatedforzerohedge's picture

yeah wonder if you went short based on Zero Hedge over the last 5 years, and doubled down with a margin every time Zero Hedge quoted a "market will crash this year" or "look at this 1929/37/etc chart that predicts a market crash soon, what your return would be

 

thisisjustarandomusernameicreatedforzerohedge's picture

i want to add that this is probably one of the most invaluable websites

and i agree the fundamentals are effed up and there are a lot of technical, social, ethical issues with the market where it's at today. and one day this website likely should, for many technical, social, or ethical reasons, eventually be 'right'

and i feel i learn a lot here. and i think the writers, though sometimes increasingly sensationalist, as a whole do an amazing job and i applaud this website.

so... i don't mean to come off as a jerk. 

 

but i'm happy i don't invest based on this website

UrbanMiner's picture

The markets are largely a fiction, Zero Hedge deals primarily with reality. I trade the markets, I also read Zero Hedge, it's like tight rope walking. 

BeetleBailey's picture

Here's my own "lather-rinse-repeat" strategy for these last five years...

Went long and strong in 2008....AFTER THE CRASH....tasty bargains galore....it was like being alone in Neiman Marcus with a black American Express card...

Had gold and silver already bought (the real thing, not the silly stawks/ETF's)...waaaaaaay back pre-2006....(think the 300 an ounce range)

SOLD OUT my clients to get their initial investment back in PM's in August 2011....hello. <Verifiable to skeptics>

Now "risk-less"....which the clients love.

At century marks in the DOW, S&P, RUT and QQQ - "pruning"....and began a nibble short program in 2012 -2013.....also PM's for newer clients....and adding to Au coins now.....MF's and stawks bought in 2008,09 are all deeply in the money - some over 100%....

Hedged...correctly....and patience....NO short program in any client portfolio is over 6% of their overall holdings....increasing under hopium "rules"....

Time...patience....

 

 

BeetleBailey's picture

"based on Zero Hedge"....is the key phrase.

Anyone basing their investment plans based on - ANY- web site's blather is a moron, and should not be allowed to run their own, or others money.

I agree with many posts on here. The way I invest and place my clients money is another story.

A wise man on here (Cog) has the phrase of truth for the decade;

"Know the Truth, but Trade the Lie"

spot on....

Apocalicious's picture

Cog, I think, also once said the market can remain solvent longer than you can remain rational.

 

I miss the days when Zerohedge was a lot more Cog, and lot less blather. 

stocktivity's picture

When the correction does take place, every single one of the talking heads will claim they called it.

failure to perform's picture

I agree. I read the title and said WHEN? WHEN? WHEN? WHEN? Just let it collapse.

JustObserving's picture
A 30% Stock Market Correction in 2014

Kevin Henry will not permit that.  Besides, Yellen will appoint a hundred Kevin Henrys if needed.  The fraud is with us till the bitter end.

insanelysane's picture

There is no way it is going down till at least 2017.  There are more elections to be won and the only people still participating need the market to go up or die.

WhackoWarner's picture

You are dreaming.  Until the nightmare cometh

SmittyinLA's picture

30% is generaous when you consider all the money losing crap in the market today, BTW what % of tech revenues are from illegal NSA data purchases? 

Could it go away if laws were enforced? 

How many other companies would go under if laws were enforced?

"Uh ya, sorry we're not gonna let you commit fraud, money laundering, and price fix anymore" 

Imagine the horror of a new government or loss of power for the existing govt.

 

 

Sticky Wicket's picture

Only 30%? Sounds bullish to me.

q99x2's picture

Wouldn't it be nice if the world was not run on FRAUD and rational anaylysis could yield meaningful results. Since that is not the case, pay not attention to this article and you get out there and BTFD.

DerdyBulls's picture

I wish he'd put a pair behind his forecast and short it out.

Comte d&#039;herblay's picture

Exactement!!  Why anyone takes these people seriously, and doesn't call them out on these forecasts, on which they seem so certain, is a mystery.  It smacks of desperation on ZH part to find anyone that will support a market crash, the sooner the better.

If you're predicting a 30% correction, back it up and show us the brokers' chits that prove your shorts.

 

 

Beam Me Up Scotty's picture

ZH is just the messenger.  Don't kill the messenger.  Robottrader's big tits told me to invest in the S&P years ago and not in gold and silver.  And you know what?  He was right---today anyway.  Tomorrow?  Who knows.

ebworthen's picture

I know they're going to crash it again, but only after Mom and Pop and every pension fund is all in, to the hilt.

I'll believe it when it happens; been hearing this since 2011.

I thought last month might be it, but no such luck.

Maybe this October, maybe December 2016.

Float it until Hitlary is elected?

asking4it2k's picture

The FED wont let the bubble pop and hurt their "primary dealers". They will keep the party going because if the bubble does pop what will save the economy then?? Would congress get together and end the FED ?

marathonman's picture

They can and will let the bubble pop if the real intention is to bankrupt the US and force the SDR on the rest of the world and us.  These goons have bigger hopes and dreams....

Son of Loki's picture

<< is all in, to the hilt. >>

 

Thanx for the reminder. I need to empty the remainder of my 401(k) and tap the rest of equity out of my house for the new iHealth app and iTablet and some other shit.

you enjoy myself's picture

pension funds are one of the main reasons we'll never see it crash (until the Fed finally loses control).  we'll go the way of Zimbabwe before the Fed would ever allow seniors (read: likely voters) to have their nest eggs blown up.  even with pie-in-the-sky estimates of 8% returns most funds are already insolvent - the SHTF with a 30% correction.

r00t61's picture

This article by Chris Martenson said that we were going to have another 2008-type financial crisis.  It was posted on 5/2012. http://www.zerohedge.com/news/chris-martenson-we-are-about-have-another-...

 

This article, by Tyler and Nanex, said that the stock market was soon approaching another "Flash Crash."  It was posted on 10/2012.

http://www.zerohedge.com/news/2012-10-21/stock-market-fragility-fast-app...

 

This article by Chris Martenson said that we were going to have a 40% market correction.  It was posted on 2/2013.  http://www.zerohedge.com/news/2013-02-28/guest-post-diminishing-qe-retur...

 

This article by Michael Snyder said that another real estate crash was imminent.  It was posted on 8/2013.  http://www.zerohedge.com/news/2013-08-02/why-another-great-real-estate-c...

 

This article by the Japan Times said that there would be a China/Japan war in January 2014.  It was posted on 12/2013. http://www.zerohedge.com/news/2013-12-08/japan-press-china-japan-war-bre...

Despite the forecasts, though, we haven't had a stock market crash.  We haven't had a real-estate crash.  We haven't had Grexit.  We haven't had the derivatives time-bomb go off.  We still haven't seen the end of the petrodollar regime.  We take hit after hit but we still limp along.

What have we seen?  Dow, Nasdaq, S&P all reaching new highs; gold getting slammed lower and lower every day.

I'm not picking on ZH.  Forecasting is definitely hard.  I have articles bookmarked from Mish that claimed that Greece would exit the Euro in 2013; I have articles from Lewrockwell that claimed that gold would reach $2,300/oz by 1/2014; I have articles by FOFOA that claim that gold should reach $50k/oz, etc.  I have a Jim Willie article from 2013 that claimed that the premium over spot for physical silver would soon reach $50/oz; and that the COMEX would soon be shut down because it could no longer deliver any physical gold. I saved a number of posts by one-time ZH user "ekm," who had a lot of interesting things to say about this and that.  His thesis was all predicated on the price of oil, and he forecasted that it would eventually go ballistic, and that would be the catalyst for the collapse. 

That didn't happen, and I don't see ekm posting anymore.

Most recently I have a interview with Gerald Celente from a month ago where he claimed that total economic collapse would commence by 7/1/2014.

I guess Celente still has a month to see whether he's right on that one.

I save all these articles that have a "big forecast" in them, so I can check back on them later.  Like ebworthen said, we've been hearing this crash stuff for years.  Everybody and their mother wants to predict the next crash, just like the few that managed to predict the 2007/2008 crash. 

But most of these forecasts tend to be really wrong.  That's just the way it is.  I'm going to save this Jakobsen article too, and reflect upon it during Christmas of 2014.  We'll see if he's right.

The big stuff seems to come out of left field.  Who was predicting the Cyprus fiasco from a year ago?  Who saw the Libor scandal unraveling the way it did?  Who saw the Ukraine being used in a game of Langley neo-con tug of war?

Not me at least, that's for certain.

 

 

Escapeclaws's picture

Thanks for this excellent post. I will be following your posts from now on. This is invaluable infiormation.

One thing that gets my goat about these predictions is that we are never allowed to see the thinking prcess behind the prediction. It's always just "Trust me, I'm a financial wizard!" The person then cherry picks his past predictions as "proof" of that. People publishing their predictions should be willing to honestly answer all questions put to them concerning the logic behind the prediction. They should put up or shutup and not use their reputation as a prop.

Haven't heard to much from stackers lately including Gordon Gekko who was advising people to buy gold even when it was near its high. You would think they would be screaming "Buy" now, given that the price is low, but they are nowhere to be heard. Perhaps owing to the decline, they are afraid the price will drop further?The red flag is when there is a "plausible narrative" behind the advice, such as the much-touted hyperinfation hypothesis. The current narratve to get you to buy gold is that it is insurance rather than an investment per se. That way, if the price drops, it is still good insurance. Or how about the story, "The Chinese are buying gold to create a gold-backed currency that will replace the dollar as the world's reserve currency." The red flag here is the phrase, "the Chinese..." Another red flag is "Jim Rogers sez..." Better to have youself tied to the mast than listen to the sirens wailing.

Bloody Muppet's picture

I know they're going to crash it again, but only after Mom and Pop and every pension fund is all in, to the hilt.

 

You mean when there are no more buyers? That makes sense.

telefunken's picture

I thought the crash was set for sept. 2016?! That way they can rush in hilary or 0bam can just stay (i know,i know)

But really why would he leave?The republicans can just fundraise of it and if anyone protests the dept. of edu. can just use their 7 trillion bullets.

 I think "they" have to keep 0 in-hilary is too old (I doubt (physically) she can make it through the primaries and the media has shown it will support anything-He's the perfect demagogue.

 So yea,put me on record for fall '16 crash-at the latest feb '17

 Printing has shown it can go farther than anyone has thought possible and companies (sitting on trillions) can just buy "up" their own stocks...

Democratic koolaid's picture

Shit is gona Inflate throught the summer!

on a side note is there a bubble forming within the newly emerging medical/recreational marijuana stocks, the industy is over-served? 

insanelysane's picture

With all of the circuit breakers in place there is no way the market can drop more than 5%.

world_debt_slave's picture

Bullish in this market.